Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA Takes Class-Based Approach to Assess Per- and Poly-fluoroalkyl Substances (“PFAS”). EPA has recently accelerated its comprehensive, multi-agency approach to assess the risks posed by PFAS. First, pursuant to its authority under the Safe Drinking Water Act (“SWDA”), on July 12, 2021, EPA released its contaminant candidate list 5 (“CCL5”), which lists broad classes of PFAS chemicals for potential future regulation as groups and will provide federal officials with comprehensive data regarding the effect PFAS have on drinking water. Second, on July 14, 2021, EPA released a national PFAS testing strategy under the Toxic Substances Control Act that requires industry to test the toxicity and other properties of PFAS and report the results to EPA’s waste and water offices. Third, on July 14, 2021, the White House Council on Environmental Quality announced that it is supervising efforts by the U.S. Department of Agriculture to respond to livestock exposed to PFAS and by the Food and Drug Administration to study the risks of PFAS in cosmetics. Finally, EPA is considering regulating PFAS as a “hazardous substance” under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and as a “hazardous waste” under the Resource Conservation & Recovery Act (“RCRA”). Although chemical industry critics believe that the class-based approach is unduly broad because it targets individual PFAS substances that may not be harmful, proponents contend that such regulation is necessary due to the toxin’s known bioaccumulation and mobility properties.

EPA Plans to Revise Discharge Limits to Target PFAS and Nutrients. On September 8, 2021, EPA released the “Preliminary Effluent Guidelines Program Plan 15” (“Plan”), which announced new rulemakings and studies regarding PFAS in wastewater discharges and plans to revise effluent limitation guidelines (“ELGs”) for power plants, landfills, the metal industry, and the Organic Chemicals, Plastics, and Synthetic Fibers (“OCPSF”) industry. The Plan also detailed EPA’s intent to implement Meat and Poultry industry regulations that update ELGs to account for phosphorus and nitrogen in discharges from slaughterhouses, meat processing plants, and rendering operations. Importantly, the Plan is the first time EPA has publicly committed to implement rules that limit PFAS in wastewater discharges. Further, EPA will update Meat and Poultry ELGs for the first time since 2004. EPA will take comments on the Plan for 30 days after publication in the Federal Register.

New EPA Draft Testing Method for 40 PFAS Substances. On September 2, 2021, EPA published Draft Method 1633, the first draft laboratory analytical method with the ability to test for forty PFAS substances in several different environmental media including wastewater, surface water, and soil. Although EPA will not require the test method in CWA compliance monitoring until it officially promulgates Draft Method 1633, EPA is strongly encouraging state regulators to start using the new method to set discharge limits for National Pollutant Discharge Elimination System (“NPDES”) permit holders and applicants. Further, upon official promulgation, EPA intends to use the testing method to establish technology-based PFAS effluent limits for several industry sectors. Finally, the testing method is likely to facilitate state efforts to regulate PFAS as a class, which was previously impracticable due to a lack of uniform and approved testing methods for PFAS in soil and water. Accordingly, proponents of the testing method, including state regulators and clean water groups, assert that it provides agencies with a valuable tool to limit PFAS exposure. Discharge limits for PFAS could potentially reduce the amount of chemicals that reach drinking water, hopefully reducing treatment costs for public water systems.

U.S. House of Representatives Passes PFAS Action Act of 2021. On July 21, 2021, the U.S. House of Representatives passed the PFAS Action Act of 2021 (“the Act”) and it is now pending in the U.S. Senate Committee on Environment and Public Works. The Act seeks to designate PFOA and PFOS, the two main categories of PFAS, as “hazardous substances” under CERCLA, the Comprehensive Environmental Response Compensation and Liability Act. The Act is virtually identical to the PFAC Action Act of 2019, which passed in the U.S. House of Representatives but ultimately died in the Senate. The Act’s goal of designating PFOA and PFOS as hazardous substances aligns with the EPA’s objectives outlined in the agency’s PFAS Action Plan, released in 2019.

Designating PFAS as hazardous substances under CERCLA could significantly expand the scope of potentially responsible parties and cleanup costs at CERCLA sites, impact compliance obligations and costs, increase enforcement actions, and trigger future litigation. Therefore, it is imperative that entities involved in the generation, transportation, disposal, or storage of PFAS-contaminated materials monitor the U.S. Senate’s forthcoming decision on the Act.

EPA Updates Nutrient Water Quality Criteria for Lakes and Reservoirs. In response to climate change and its effect on harmful algal blooms, on August 13, 2021, EPA released the “Ambient Water Quality Criteria to Address Nutrient Pollution in Lakes and Reservoirs” (“Criteria”), the first revision of its nutrient water quality criteria for lakes and reservoirs in twenty years. In the Criteria, EPA established nitrogen and phosphorous standards for states to use in regulations to protect drinking water sources, aquatic life, and recreation from excess nutrients. Although several critics, including wastewater and drinking water utilities, assert that the Criteria will limit a state’s ability to implement its own nutrient standards, EPA reasons that, due to flexibilities in the recommendations, states may adopt the Criteria or merely use them as guidance. Accordingly, EPA emphasizes that, because the Criteria provides general water quality standards, states can customize the standards and implement nutrient regulations based on local environmental conditions.

EPA & Corps Revert to Pre-2015 WOTUS Regime Following District Court’s Vacatur Ruling. In response to an Arizona federal district court’s ruling in Pascua Yaqui Tribe v. U.S. Environmental Protection Agency that vacated and remanded the Navigable Waters Protection Rule (“NWPR”), a Trump-era rule that amended the definition of waters of the United States (“WOTUS”), EPA and the U.S. Army Corps of Engineers (“Corps”) announced that they have halted NWPR’s implementation and are now interpreting WOTUS in accordance with pre-2015 regulations, essentially returning to policies written during the 1980s and 1990s. After the Arizona court’s ruling, three other federal district court judges declined to vacate NWPR; rather, because EPA and the Corps announced their intent to revise NWPR, the judges granted the agencies’ request for voluntary remand. Based on the subsequent rulings, it is unclear whether the Arizona district court can issue a blanket vacatur that applies nationwide or if the vacatur only applies locally. Nonetheless, EPA and the Corps stated that, in light of the Arizona district court ruling, they are working “expeditiously” to establish a new WOTUS definition.

EPA Rescinds Guidance on CWA Permit Requirements. EPA’s Office of Water is rescinding guidance interpreting the Supreme Court’s decision in County of Maui v. Hawaii Wildlife Fund. The Court established seven criteria to consider when analyzing whether a discharge to groundwater is the “functional equivalent” to a direct discharge to navigable waters. Those factors are transit time, distance traveled, the nature of the material through which the pollutant travels, the extent to which the pollutant is diluted or chemically changed as it travels, the amount of pollutant entering the navigable waters relative to the amount that leaves the point source, the manner by or area in which the pollutant enters the navigable waters, and the degree to which the pollution at that point has maintained its specific identity. The Trump-era guidance added an eighth criteria for “the design and performance of the system or facility from which the pollutant is released.” The Biden EPA is rescinding this eighth factor because it goes beyond the Court’s seven criteria and because the guidance was issued without proper deliberation within EPA or its federal partners. The Office of Water is determining the next steps, but EPA has said in the interim that the Supreme Court’s decision “provides guiding principles regarding when a discharge to groundwater is jurisdictional under the Clean Water Act that permit writers can use to implement the decision.” EPA’s September 15, 2021 memo finds the decision does not suggest that the existing, or lack, of a state groundwater protection program has any bearing on whether the “functional equivalent” analysis applies, thus the existence of a state program does not obviate the need for NDPES permitting authorities to apply the Supreme Court’s seven factor test. EPA will continue to conduct a site-specific, science-based evaluation.

White House’s Justice40 Initiative to Include Critical Clean Water and Wastewater Infrastructure. On July 20, 2021, the White House released an interim implementation guidance to agency heads that selected several EPA programs, including the drinking water state revolving fund, the clean water state revolving fund, the reducing lead in drinking water program, and the Superfund remedial program, to implement its Justice40 initiative, which aims to allocate forty percent of the benefits from certain federal spending initiatives to environmental justice (“EJ”) communities. The guide does not instruct agencies how to calculate EJ benefits and orders them to develop their own approach to implement the pilot program. However, according to the guide, within sixty days each participating agency must send to the White House Office of Management & Budget (“OMB”) an assessment of the benefits the program provides. Further, within 150 days, each agency must provide the OMB with the method the agency uses to calculate the program’s EJ benefits. The guidance also includes a draft definition of disadvantaged communities eligible to receive benefits under Justice40, including high and/or persistent poverty, high transportation cost/low transportation access, high energy cost/low energy access, disproportionate environmental stressor burden and high cumulative impacts, and access to healthcare. Covered programs include investments in climate change, clean energy, energy efficiency, and critical clean water and wastewater infrastructure.

EPA Releases Environmental Justice Guidance Documents. In the July 2021 edition of The Lone Star Current, we reported on EPA’s plans to release a series of three Environmental Justice guidance documents. We reported on the first guidance document, released in April 2021, outlining actions intended to strengthen enforcement and advance the protection of “overburdened communities” with Environmental Justice concerns. Since that time, EPA has released the remaining two guidance documents.

• EPA released the second guidance document in the series, entitled “Strengthening Environmental Justice Through Criminal Enforcement,” on June 21, 2021. This second guidance document outlines actions to advance EPA’s Environmental Justice goals through criminal enforcement matters by:
• Strengthening detection of environmental crimes in overburdened communities;
• Improving outreach to victims of environmental crimes; and
• Enhancing remedies sought in environmental criminal cases.
  

On July 1, EPA issued the third guidance document, entitled, “Strengthening Environmental Justice Through Cleanup Enforcement Actions,” which urges EPA Regional Offices to increase cleanup program enforcement under CERLCA and RCRA, particularly at sites that “most impact overburdened communities.” The document sets forth five general objectives:

• Require responsible parties to take early cleanup actions;
• Ensure prompt cleanup actions by responsible parties;
• Improve enforcement instruments;
• Increase oversight of enforcement instruments; and
• Build trust and capacity through community engagement.

EPA Proposes Revisions to Federal Greenhouse Gas Emissions for Vehicles. On August 5, 2021, EPA issued a Notice of Proposed Rulemaking (“NPRM”) to revise the federal greenhouse gas (“GHG”) emissions standards for light-duty vehicles for model years 2023-2026. The proposed revisions generally set forth more stringent GHG emissions standards for the light-duty vehicle models, beginning with a 10 percent stringency increase for the 2023 models and increasing by about 5 percent year over year for future models. The written comment period on the NPRM ends on September 27, 2021.

In conjunction with the NPRM, on August 5, 2021 the Biden Administration issued an Executive Order on Strengthening American Leadership in Clean Cars and Trucks. The Executive Order sets a nationwide target to make half of all new passenger car and light truck sales in 2030 be zero-emission vehicles (“ZEVs”), including battery electric, plug-in hybrid electric, or fuel cell electric vehicles. Furthermore, the Executive Order directs the EPA and National Traffic Safety Administration to establish new fuel efficiency and emissions standards by July 2024, establish GHG standards for light- and medium-duty vehicles for model years 2027-2030, and establish GHG standards for heavy-duty vehicles through model year 2029.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ Releases Emergency Preparedness Plan Template. During the 87th Regular Legislative Session, the Texas Legislature passed Senate Bill 3 (“SB 3”) to improve reliability and weatherization efforts for utilities. SB 3 create Texas Water Code § 13.1394 to require “affected utilities,” essentially water service providers, to provide critical infrastructure information to the Public Utility Commission by November 1, 2021, and submit an Emergency Preparedness Plan (“EPP”) to TCEQ by March 1, 2022, for implementation by July 1, 2022. TCEQ published an EPP template, available at: https://www.tceq.texas.gov/drinkingwater/homeland_security/disasterprep/epp. TCEQ has also created an EPP Help Form for affected utilities to get help with SB 3 and EPPs: https://bit.ly/3pdqAZK

TCEQ Personnel Update. TCEQ’s Districts section manager, Chris Ulmann, left the agency on August 23, 2021. In the interim, Dan Finnegan will serve as acting manager for the Districts section until the position is filled. Finnegan is the TCEQ Water District Bond Team Leader and is familiar with processing water district bond applications, water district creation applications, emergency authorization approvals, and regional service provider certifications.

TCEQ Adopts Final Rule to Amend Public Notice and Participation Requirements. In the April 2021 edition of The Lone Star Current, we reported on TCEQ’s proposed rulemaking to amend TCEQ’s public notice and participation requirements related to waste, water, and air permit applications. The TCEQ Commissioners adopted a final rule on August 25, 2021 and published the final rule in the Texas Register on September 10, 2021.

The final rule creates additional alternative language requirements for applicants and the TCEQ on waste, water, and air permit applications. When they apply, the new language requirements affect public meeting notices and responses to hearing requests, and require an alternative language plain language summary of applications and live translation services during public meetings. During the rulemaking process, the public was very engaged and filed many comments requesting clarification of certain aspects of the proposed rule. In response to the public comments, TCEQ made clarifications or amendments to the proposed rule, including the following, before adopting it as a final rule:

• in the event of an alleged translation error, the original English version of a document shall be deemed conclusive;
• the rule does not require translation of any permit documents unless the applicant chooses to include such a document in a response to hearing request;
• the rule does not require licensed individuals (for example, engineers, surveyors, and geoscientists) to seal documents that are required to be translated and does not require translation of documents that are required to be sealed or stamped, unless the applicant includes them in a response to hearing request;
• new rule language provides for remedies in case of errors in translation and specifies that the English document controls and that if egregious or substantive errors are made with respect to notice, then re-notice may be required; and
• the rule provides definitions of “professional” and “competent” translation services.

The final rule went into effect on September 16, 2021. However, many of the requirements are not triggered until May 1, 2022. The requirements that are triggered now apply to Notices of Receipt of Application and Intent to Obtain Permit (“NORIs”) and Notices of Application and Preliminary Decision (“NAPDs”).

TCEQ Adopts Amendment to Air Quality Standard Permit for Concrete Batch Plants. On September 22, 2021, the TCEQ adopted an amendment to the air quality standard permit for concrete batch plants. TCEQ originally issued the concrete batch plant standard permit in 2000, amended it in 2003, and again in 2012. This latest amendment reinstates an exemption from emissions and distance limitations that was inadvertently removed during the 2012 amendment. The exemption operates to reduce crystalline silica air emissions accounting when TCEQ considers issuing the standard air permit.

TCEQ Proposes Rulemaking to Amend Industrial Solid Waste and Municipal Hazardous Waste Rules to Maintain Equivalency with RCRA Revisions. In the July 2021 edition of The Lone Star Current, we reported on a potential future TCEQ rulemaking to amend, repeal, and replace a number of sections of 30 Texas Administrative Code Chapter 335, Industrial Solid Waste and Municipal Hazardous Waste, in order to maintain equivalency with Resource Conservation and Recovery Act (“RCRA”) revisions promulgated by EPA. On July 30, 2021, TCEQ published the proposed rulemaking, which seeks to update Chapter 335 to include federal rule changes set forth in parts of RCRA Clusters XXIV – XXVII. The most notable of the proposed changes involve:

• Revising the existing hazardous waste generator regulatory program by (1) reorganizing the regulations to improve their usability by the regulated community and by (2) providing greater flexibility for hazardous waste generators to manage their hazardous waste in a cost-effective and protective manner;
• Revising existing regulations regarding the export and import of hazardous wastes from and into the United States by applying a confidentiality determination such that no person can assert confidential business information claims for documents related to the export, import, and transit of hazardous waste;
• Revising rules to adopt EPA’s methodology for determining the user fees applicable to the electronic and paper manifests to be submitted to the e-Manifest system;
• Revising rules to prohibit disposal of hazardous waste pharmaceuticals into the sewage system and codify the exemption for unused pharmaceuticals that are expected to be legitimately reclaimed from being classified as a solid waste; and
• Adding rules to add hazardous waste aerosol cans to the universal waste program.

TCEQ anticipates adopting a final rule in January of next year.

TCEQ Proposes Rulemaking to Clarify Composting Notice Process and Obsolete Terms. In the July 2021 edition of The Lone Star Current, we reported on a potential future TCEQ rulemaking to clarify and update existing notice language and requirements for composting facility applications. On July 30, 2021, TCEQ published the proposed rulemaking, which seeks to provide clarity on who will receive notice for compost Notifications of Intent (“NOIs”), and to remove other vague mailing requirements. In addition, this rulemaking would incorporate applicability, fees, and reporting requirements from 30 TAC Chapter 330, Subchapter P into sections for registered and permitted facilities. Revisions and clarifications would also be made to various citations and other conflicting rules between multiple chapters. Lastly, broken and obsolete links, typos, misspellings, and grammar mistakes would be fixed throughout the rule to ensure clarity and readability, and provide overall effectiveness.

TCEQ anticipates adopting a final rule on December 15, 2021.

TCEQ Releases 2021 Recycling Market Development Plan. On September 1, 2021, TCEQ released the 2021 Recycling Market Development Plan (the “2021 plan”) as a follow up to the 2017 Study on the Economic Impacts of Recycling in Texas. The 2021 plan studies the use of recyclable materials as feedstock in processing and manufacturing and includes an update of economic impacts information for the recycling industry. The 2021 plan indicates that the recycling industry currently represents $4.8 billion of the Texas economy. The 2021 plan also discusses tools and mechanisms that can be used for material specific and cross-material strategies and opportunities to increase market development, decrease barriers, and promote recycling in the State of Texas.

Public Utility Commission of Texas (“PUC”)

Governor Abbott Appoints New Commissioner to the PUC; One Vacancy Remains. In the previous two issues, we reported that all three Commissioners of the PUC resigned in the wake of Winter Storm Uri, and since that time, Governor Abbott has appointed a new Chairman, Peter Lake, and two new Commissioners, Will McAdams and Lori Cobos, to the PUC. Since then, on August 6, 2021, Governor Abbott made a new appointment to the PUC: Jimmy Glotfelty. Glotfelty is the former Director of Government Solutions for Quanta Services, the former Founder and Executive Vice President for Clean Line Energy Partners, and the former Managing Director for ICF Consulting. Additionally, Mr. Glotfelty was the former Director of the Office of Electric Transmission and Distribution and a Senior Policy Advisor to the Secretary of Energy for the U.S. Department of Energy, according to information provided by the Governor’s office. Glotfelty’s term will expire September 1, 2025. There remains one vacant PUC Commissioner position.

Update on PUC Rulemaking Projects. The PUC continues to implement market redesign changes required by the 87th Texas Legislature. The Commissioners are hosting regular “work sessions” designed to focus on different aspects of redesigning the ERCOT market, inviting panels of leading industry experts to come speak at each session. PUC Staff has opened various new rulemaking projects and has published a rulemaking calendar in Project No. 51715, providing insight about the rulemaking and implementation process the agency will undertake to address the recently enacted legislation. The PUC has published the following list of upcoming, pending, or completed rulemakings, among others:

• Project No. 52373, Review of Wholesale Electric Market Design
• Project No. 51871, Review of the ERCOT Scarcity Pricing Mechanism
• Project No. 51830, Review of Certain Retail Electric Customer Protection Rules
• Project No. 51840, Rulemaking to Establish Weatherization Standards
• Project No. 52312, Review of Administrative Penalty Authority
• Project No. 52287, Power Outage Alert Criteria
• Project No. 52345, Critical Natural Gas Facilities and Entities
• Project No. 52631, Review of 25.505
• Project No. 51888, Review of Critical Load Standards and Processes
• Project No. 51841, Review of 16 TAC § 25.53 Relating to Electric Service Emergency Operations Plans
• Project No. 52301, ERCOT Governance and Related Issues

ERCOT’s Securitization Cases Progress at PUC. In June, Governor Abbott signed legislation authorizing the use of securitized debt to recover some expenses incurred by ERCOT and ERCOT market participants during Winter Storm Uri. The law, House Bill 4492, identified two specific categories of expenses—“default balance” expenses, defined as money owed to ERCOT because of financial defaults by market participants, and “uplift balance” expenses, defined as ancillary service charges and reliability deployment price adders imposed in excess of the PUC’s System-Wide Offer Cap (SWOC). On July 16, 2021, ERCOT made two filings with the PUC relating to both the Default Balance provisions and the Uplift Balance provisions of HB 4492. These filings can be found on the PUC interchange in Docket Nos. 52321 and 52322, respectively. For more information, see Taylor Denison’s Winter Storm Uri article on page 4.

PUC Extends Waiver of ERCOT Protocol Related to Confidential Outage Information. On June 24, 2021, the Commissioners voted to waive ERCOT Nodal Protocol § 1.3.1.1(1)(c), consistent with Chairman Lake’s memo from the previous day, which protects outage information for sixty days for forced outages, effective for the time period of June 1, 2021 through September 30, 2021. Chairman Lake’s memo stated that “we need more transparency and information about forced outages and that information should quickly be made available to the public.” Under the ERCOT protocols, information regarding forced outages is considered protected and confidential for a 60-day period. However, after a call for conservation in early June due in part to a higher than expected number of forced generation outages, Chairman Lake stated that the public deserved to know “what generation units are unavailable, the amount of unavailable capacity, the cause of the outage, and when the units are expected to return to service.” At the September 23, 2021 Open Meeting, the Commissioners voted to extend Chairman Lake’s order directing ERCOT to make outage and derate reports available to the public within three days instead of the standard 60 days. The current order was set to expire on September 30, 2021, so the Commissioners approved a motion to extend the order from October 1, 2021 to May 31, 2022.

PUC Opens Proceeding to Nominate Texas Energy Reliability Council Members. Senate Bill 3, passed by the 87th Texas Legislature, created a new Texas Energy Reliability Council (“TERC”) to “(1) ensure that the energy and electric industries in this state meet high priority human needs and address critical infrastructure concerns; and (2) enhance coordination and communication in the energy and electric industries in this state.”1 Chapter 418, Subchapter J of the Texas Government Code describes the function and the membership of TERC and requires the PUC to nominate eight members to TERC. The PUC has opened a new proceeding, Project No. 52557, to nominate those members to TERC. The Executive Director filed a memo in that proceeding providing instructions for interested individuals to indicate their interest and describe their qualifications by submitting a letter of interest, a resume, at least one letter of support for the candidate’s appointment from someone with a connection to the energy industry in Texas, and any additional information to inform the decision. The deadline to file the required information was September 30, 2021. Executive Director Thomas Gleeson stated during the September 23 Open Meeting that he intended to make selections for all eight spots by October 8, 2021. However, no selections have been publicly made.

PUC Report Details Reliability and Spending for Distribution Utilities. The PUC published its annual “Electric Utility Distribution System Spending and Reliability” report, which tracks reliability and reliability-related spending by the state’s investor-owned electric utilities with distribution service. Included in the report are figures and calculations for Oncor Electric Delivery Company LLC (“Oncor”), CenterPoint Energy Houston Electric, LLC (“CenterPoint”), and six other utilities: El Paso Electric, Entergy Texas, Sharyland, Southwestern Public Service Company, Southwestern Electric Power Company, and Texas-New Mexico Power. Oncor and CenterPoint hold positions roughly in the middle of the pack as compared to other utilities with regard to the frequency and duration of outages on their distribution systems, the report shows. However, the Sharyland distribution system—a system acquired by Oncor in December 2016—rates comparatively high among all utilities with regard to the frequency and duration of outages, according to the report. The report also showed that in recent years, Oncor and CenterPoint—the state’s two largest electric transmission and distribution utilities—more than doubled their gross capital expenditures for additions to their distribution system. The “Electric Utility Distribution System Spending and Reliability” report can be found under Docket No. 46735.

Electric Utility DCRF Applications Settle. As we previously reported, Texas-New Mexico Power Company (“TNMP”), AEP Texas (“AEP”), and Oncor filed applications with the PUC in April to adjust their Distribution Cost Recovery Factor (DCRF) to recover new investment in distribution equipment. All three of the cases have settled, and details on each are below:

TNMP filed its DCRF Application on April 5, 2021, in PUC Docket No. 51959, requesting an increase in its distribution revenues of $13,959,505. The parties unanimously reached an agreement in principle on all issues and filed the Stipulation and Settlement Agreement on July 1, 2021. In the Stipulation and Settlement Agreement, TNMP agreed to reduce its total distribution revenue requirement request by approximately $440,000, for a DCRF revenue requirement increase of $13,519,505, effective September 1, 2021. A Final Order approving the unanimous agreement is still pending.

On April 6, 2021, AEP filed its DCRF Application, in PUC Docket No. 51984, requesting an increase in its distribution revenues of approximately $54.56 million. The parties unanimously reached an agreement in principle on all issues and filed the Stipulation and Settlement Agreement on June 30, 2021. In the Stipulation and Settlement Agreement, AEP agreed to reduce its total distribution revenue requirement request by approximately $16.475 million, for a DCRF revenue requirement increase of $38,083,523, effective September 1, 2021. A Final Order approving the unanimous agreement is still pending.

Oncor filed its DCRF Application on April 8, 2021, in PUC Docket No. 51996, requesting an increase in its total distribution revenue requirement by $97,826,277. The parties unanimously reached an agreement in principle on all issues and filed the Stipulation and Settlement Agreement on June 17, 2021. In the Stipulation and Settlement Agreement, Oncor agreed to reduce its total distribution revenue requirement request by $10 million, for a DCRF revenue requirement increase of $87,826,277, effective September 1, 2021. A Final Order approving the unanimous agreement was issued on July 30, 2021.

Electric Utility EECRF Applications Settle. As we previously reported, TNMP, Oncor, CenterPoint, and AEP filed applications with the PUC in May and June to adjust their Energy Efficiency Cost Recovery Factor (“EECRF”) to reflect changes in program costs and bonuses, and to minimize any over- or under-collection of energy efficiency costs resulting from the use of the EECRF. All four of the cases have settled, and details on each are below:

On May 27, TNMP filed its 2022 EECRF application with the PUC, seeking to adjust its EECRF to collect $7,225,543.49 in 2022. The parties unanimously agreed to a reduction of the adjustment by $49,187. Pursuant to the agreement, TNMP will collect $7,176,355.99 in 2022. On August 6, TNMP filed the Proposed Order, pending approval by the PUC. TNMP’s EECRF filing can be found under Docket No. 52153.

Oncor filed its 2022 EECRF application with the PUC on May 28, 2021, seeking to adjust its EECRF to collect $83,760,515 in 2022. The parties have identified adjustments that should be made to Oncor’s request and have reached an agreement in principle on the issues. The parties are currently working on finalizing the settlement agreement and documents, which are due to be filed by September 17, 2021. Oncor’s EECRF filing can be found under Docket No. 52178.

On June 1, CenterPoint filed its 2022 EECRF application with the PUC, seeking to adjust its EECRF to collect $63,367,922 in 2022. The parties have unanimously reached an agreement in principle on all issues, including a $115,000 reduction to CenterPoint’s EECRF revenue requirement and the removal of $200,000 in historical administrative expenses, for a total reduction of $315,000 to CenterPoint’s total EECRF tariff revenue requirement. Pursuant to the agreement, CenterPoint’s revenue requirement will total $63,052,922 in 2022. The agreement was filed with the PUC on September 15, 2021. CenterPoint’s EECRF filing can be found under Docket No. 52194.

AEP filed its 2022 EECRF application with the PUC on June 1, 2021, seeking to adjust its EECRF to collect $27,021,197 in 2022. Under a unanimous agreement that settles all issues in the case, the parties agreed to a reduction of $100,000 from the original request, so AEP will recover $26,921,197. The agreement was filed at the PUC on August 20, 2021. AEP’s EECRF filing can be found under Docket No. 52199.

PUC Grants Oncor’s Request for Extension of Deadline to File Base Rate Case. On May 10, 2021, Oncor filed an application with the PUC, requesting the PUC grant a good-cause exception to the October 2021 deadline to file its comprehensive base-rate review under 16 Texas Administrative Code (TAC) § 25.247. Under the PUC’s rate review schedule rule for investor-owned electric utilities, each utility must file its comprehensive rate proceeding on or before the date listed in the rule, which is October 1, 2021 for Oncor. Oncor is also subject to a prior PUC order that it make a rate filing by that date (Docket No. 48929). In its good cause application, Oncor stated that good cause supported an extension of Oncor’s filing deadline until June 1, 2022, due to challenges from the historic February 2021 winter storm event and the COVID-19 pandemic. Oncor also stated that an extension was necessary to “avoid further constraining the Commission and other parties’ resources” during the transitional period of the PUC gaining “an entirely new slate of commissioners.” PUC Staff and the parties who typically intervene in Oncor’s base rate cases indicated that they either supported or were unopposed to Oncor’s extension. On July 30, 2021, the PUC issued a Final Order granting Oncor’s request and extending the deadline for Oncor to file its base-rate case from October 1, 2021 to June 1, 2022.

Railroad Commission of Texas (RRC)

RRC Staff Proposes Rules for HB 3648 and SB 3 Implementation. RRC Staff has proposed new rules to implement energy reliability reforms included in House Bill (HB) 3648 and Senate Bill (SB) 3. Filed by Staff on September 10, 2021, the proposed rules specify the criteria and processes by which Texas natural gas facilities are to receive energy emergency critical designations. For more information, see Taylor Denison’s Winter Storm Uri article on page 4.

Gas Utilities File for Securitization. On June 30, 2021, eleven local distribution gas utilities across Texas filed for regulatory permission to charge their customers more than $3.6 billion in incremental gas costs incurred during Winter Storm Uri. Under the applications, the utilities would employ a unique form of financing known as “securitization” to receive the reimbursements, which then would be combined and collected (with interest) and charged to customers statewide for two to three decades. For more information, see Taylor Denison’s Winter Storm Uri article on page 4.

1 See Tex. Gov’t Code § 418.302(a), enacted by Tex. S.B. 3, 87th Leg., R.S. (2021).

“Agency Highlights” is prepared by Danielle Lam in the Firm’s Water and Districts Practice Groups; Sam Ballard in the Firm’s Air and Waste Practice Group; and Taylor Denison in the Firm’s Energy and Utility Practice Group. If you would like additional information or have questions related to these agencies or other matters, please contact Danielle at 512.322.5810 or dlam@lglawfirm.com, Sam at 512.322.5825 or sballard@lglawfirm.com, or Taylor at 512.322.5874 or tdenison@lglawfirm.com.